efuturesTrader Central

Steve Massocca’s Things I Saw Today 12/6/17

There were several stories today implying imminent changes to monetary policy, are they real or just like every time before “head fakes”??

Kuroda’s ambiguity leaves traders guessing BoJ direction – FT

The FT discusses recent market views that BoJ’s Governor Haruhiko Kuroda’s recent references to the “reversal rate” may signal a shift to a more hawkish policy bias, even though there are no expectations of a near term policy change.

The story recalls that Kuroda in a speech on Monday said his monetary policy thinking “hasn’t changed,” while citing BoJ officials confirming his earlier speech in Zurich was not intended to signal a change of policy.

The report notes the question is whether Kuroda was signaling a desire to tighten policy or simply his intention not to ease it any further. Market participants generally agreed there is less conviction that the BoJ will remain super-dovish.

According to Reuters, BoJ Governor Haruhiko Kuroda tells reporters following a meeting with Prime Minister Shinzo Abe that he did not discuss who would head the central bank when Kuroda’s term expires in April next year.

The story notes that Kuroda regularly meets Abe to discuss the economy and financial markets, but the timing of the meeting on Tuesday is likely to fuel speculation that the government is already making moves to determine who will lead the BoJ next year.

Kuroda vows to stay course after speculation over tightening: Bloomberg cited BoJ Governor Haruhiko Kuroda who said that his recent comments about the “reversal rate” theory weren’t an indication of tighter monetary policy in the coming year. He added that The BoJ’s yield-curve control program, partly intended to address the impact of monetary easing on Japanese banks, has been successful and hasn’t created any problems for financial institutions such as those described in the reversal rate theory.

BoJ’s trim of bond purchases hints at ‘stealth tapering’: The Nikkei discussed monetary base data as slower growth is arousing speculation that the BoJ is paving the way for a trimming of its ultra-easy monetary policy. According to the report, the monetary base increased ¥51.7T ($458B) on the year in November, the smallest growth since the BoJ introduced easing of a “different dimension” in April 2013.

ECB set to rethink plan for curbing Eurozone bad loans: The FT said the ECB is set to rethink its plans to force eurozone lenders to face up to their bad loans after a wave of criticism from EU lawmakers and political leaders who say the proposals overstep the central bank’s authority. The draft proposals it outlined in October were put out for consultation, which ends Thursday. It noted that ECB supervisory head Nouy indicated she is willing to take heed of many of the criticisms, but it is unlikely to be ready until after the new year and the shape of measures to deal with existing bad loans looks less certain.

ECB’s Mersch says wages and inflation seemed to have reversed trend

ECB’s Mersch says, in a speech on monetary policy challenges for 2018, that the Governing Council recognizes that the QE program may have to continue until there is a sustained correction in inflation, in line with its definition of price stability.

He highlights that the recovery in the euro area continues to develop robustly and employment has increased significantly. Wages, as well as underlying inflation, seem to have made the turnaround.

He warns that if it reduces monetary stimulus prematurely and too quickly, asset prices could collapse and yields rise sharply, leading to negative contagion effects for the economy. However, he adds it also needs to be aware of risks associated with the program.

Recall that Mersch has previously said he is of the opinion that it won’t need to increase QE and has also talked up the influence of other policies in the “ECB’s toolbox”.

Greece:

Greek PM Tsipras says ECB’s bond-buying program no longer crucial: CNBC interviewed Greek PM Tsipras, who said the Greek government no longer believes that stimulus from the European Central Bank (ECB) is crucial for the economic recovery in Greece. The article noted that previously, the prime minister had said that bond purchasing from the ECB would give confidence to investors to shore up their investments in the southern European country, and thus support the economic recovery.

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